COSTA RICA & CAFTA

Forecast Jan 2nd 2008 From the Economist Intelligence UnitSource: Country Forecast Outlook for 2008-09
Between now and the end of February 2008, the political scene will be focused on passing the laws required to bring the Dominican Republic-Central American Free-Trade Agreement (DR-CAFTA), which was ratified by referendum in October, into effect.
The end-February deadline appears tight and there remains room for the opposition Partido de Accion Ciudadana (PAC) to cause delays in Congress.
A long-awaited fiscal reform will be a priority in the rest of 2008, and while it is likely to pass, this is also not certain.
Although the Economist Intelligence Unit estimates an increased fiscal deficit of 1% of GDP in 2007, the risk to our fiscal estimates appears weighted on the upside, particularly if GDP growth continues to exceed expectations.
Indicators for the third quarter support our expectations that continued firm domestic demand will drive GDP growth of 6% in 2007, offsetting an easing of overseas demand.
After breaching target in 2007, we expect inflation to ease in 2008-09.